Gold – Just One of Those Days

Just when you start to think that the precious metals are building up some positive momentum, they go and do this to you…

For those of us who have been involved in the precious metals space for any length of time, this is of course nothing new… just another $2 billion of paper gold dumped in a matter of… seconds… to drive the spot price way back down.

Nothing new here…

“Fat finger” blamed for the sell-off… lol…

From Bloomberg.

Oh well, what can you do, really?

Get out of the space, or invest in cryptocurrencies, I guess?!?

Then, to add insult to injury, we had the following occur in the precious metals sector after the stock market opened.

I used to own shares of Red Eagle Mining (R.TO/RDEMF) and have always rooted for the company to succeed (still do)… But like I keep harping on this blog, mining is a tricky ass business where things can and often do go really wrong

Red Eagle announced a Rights Offering this morning due to “challenging ground conditions” which require the construction of a paste backfill plant to remedy.

Translation — This will require more $$$ (dilution) to fix.

Here are the details of the underlying issues the company is facing at this time…

And the Rights Offering

In a nutshell, Red Eagle needs to raise C$46 million… and will be issuing new shares at C$0.35/share. Luckily, for existing shareholders (if you’re based in Canada), you’ll be able to participate in the Rights Offering and get warrants exercisable at C$0.50/share, good for 5 years!

This helps offset some of the dilution, if you’re able to participate and are convinced without a doubt that the company will be able to solve its problems without running into any more hiccups (or capital) again and having to dilute yet again…

Unfortunately, for those shareholders who can’t participate in the Rights Offering (I’m guessing shareholders who are based outside of Canada?), shit, you’re feeling pretty screwed if you bought anytime in the last year as shares of R.TO/RDEMF are now sitting at 52-week lows!

I don’t bring this news up to knock on nobody, but these type of events just further hammer home how difficult it is to execute in this sector… Whether we are talking about: early-stage explorers, developers, producers, etc., it’s just not easy…

Contrary to popular belief, producers aren’t always a “safer” bet for retail investors!

Further, incidents such as today’s news release with Red Eagle really reinforce the importance of targeting after the subset of producers out there who have extremely strong balance sheets (tons of cash and very little/zero debt). Producers who are cash constrained and run into production issues, well, they’re forced to “beg” the market for money, and won’t be able to negotiate from a position of strength… which will inevitably lead to lots and lots of: dilution, dilution, dilution.

Just something to keep in mind, moving forward for all of us…

Also, as retail investors, we have to ALWAYS remember to book some gains when we are in good profits… When everything looks most rosy, it’s time to seriously start scaling back a bit!

 

There are no guarantees in the mining game, so if you’re going to play, you really can’t risk getting too greedy.

 

Luckily, I was able to get out of Red Eagle unscathed, but right now I’m suffering quite a bit with another Colombian mining company, Cordoba Minerals (CDB.V/CDBMF), which will also sell-off hard when it exits out of its trading halt in Canada… also due to more dilution…

 

Sigh…

 

But I’ll save my thoughts on that one for a later time…

 

Fight On!

Print Friendly, PDF & Email
Sharing is Caring:

1
Leave a Reply

avatar
1 Comment authors
Vin Recent comment authors
  Subscribe  
newest oldest most voted
Notify of
Vin
Guest
Vin

Funny that “fat fingers” are always to the downside..

Close Menu